In simple terms, a tariff is a tax on imports. Tariffs artificially inflate the market price of a product which, in turn, reduces the quantity demanded as well as the price likely to be taken home by producers.

The Smoot-Hawley tariff, enacted on the eve of the economic collapse of the early 1930s, will forever be associated with an outbreak of worldwide protectionism, the collapse of world trade, and the onset of the Great Depression. (Irwin, 1998; pp. 326)

One of the big concerns surrounding tariffs is retaliation. It appears as if China is responding tit-for-tat. In other words, China might just continue to match our tariffs with their own similarly sized tariffs. This might seem puzzling given that:

“One of the main lessons of the theory of international trade is that a unilateral reduction of tariff barriers is beneficial to the country granting it, whether or not other countries reciprocate.” (Hovi, 1998; pp. 69)

It’s not so confusing if you think less about economics and more about psychology. For example, behavioral economists use the “ultimatum game” to show that people are willing to forego benefits to themselves in order to punish someone who they think harmed them.